N.A. Beer Partnership Labatt enters deal with Mexican firm

The brewing division of John Labatt is one huge step closer to delivering on its promise - made a year ago with the launch of its Ice Beers - of becoming a significant exporter of marketing, technological and distribution skills.London, Ont.-based...

The brewing division of John Labatt is one huge step closer to delivering on its promise – made a year ago with the launch of its Ice Beers – of becoming a significant exporter of marketing, technological and distribution skills.

London, Ont.-based Labatt has announced its intention to create an alliance between its brewing operations and those of Mexican-based Fomento Economico Mexicano S.A. (femsa) to create what both companies describe as a North American Beer Partnership.

Significantly, at a jointly held press conference in Toronto, Othon Ruiz Montemayer, femsa chief executive officer, stressed his company was attracted to Labatt because ‘we felt that our two companies would be the best fit. We were truly looking for a partner.’

Montemayer said femsa executives have been searching out partners in anticipation of a freer trading North American and global environment, but, in the end, it was the shared cultures and complementary fit between femsa’s and Labatt’s brewing operations that led to the deal.

In particular, Montemayer cited Labatt’s technological and marketing skills, which he said his company could take advantage of in its domestic market where its FEMSA Cerveza subsidiary has 48% of beer sales.

Montemayer did not dismiss the possibility that Cerveza may also want to tap Labatt’s considerable knowledge in forging marketing links between broadcast, sports and entertainment properties to create the same kind of marketing synergies in Mexico.

The partnership will see Labatt acquire 22% of FEMSA Cerveza for US$510 million, with an option to buy another 8% within three years.

FEMSA Cerveza’s portfolio of brands includes the labels Tecate, Carta Blanca, Superior, Dos Equis, Sol and Bohemia.

Under the agreement, Labatt and femsa will create a joint management structure.

This group will then decide which of the brands that Labatt represents in Canada, the u.s. and Europe will be introduced to Mexico for the Mexican market.

The group will also set up a new u.s. operation under the name U.S. Specialty Beer Company as an importer and marketer in the growing niche market segment of the u.s. beer market.

Labatt already has a presence in the u.s. with such brands as Rolling Rock, a number of Labatt labels and Birra Moretti, through the Italian arm of its European operations.

And, in Canada, Labatt will be marketing a selection of FEMSA Cerveza brands.

femsa, founded in 1890, is described by Labatt as the largest beverage and packaging company in Mexico, exporting to 55 countries.

In addition to its brewing operation, femsa is a bottler for Coca-Cola products and operates an extensive chain of convenience stores throughout Mexico under the oxxo name.